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EB

EVANS BANCORP INC (EVBN)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 EPS was $0.42 and net income was $2.3M; net interest margin expanded to 2.79% (+4 bps QoQ), while efficiency ratio rose to 79.9% reflecting normalized non-interest income and seasonal OpEx .
  • Deposits increased $173M (10%) QoQ to $1.89B, aided by municipal inflows and $55M brokered CDs; loans were flat QoQ but up $63M YoY to $1.72B .
  • Management guided Q2 2024 NIM to 2.65% due to temporary leverage from wholesale funding; raised 2024 loan growth expectation to ~5% and expects 2024 bank-only expenses down 1–2% YoY .
  • Capital remains solid (Tier 1 leverage 10.52%); dividend of $0.66 was declared Feb 20 and paid April 9; small buyback (~$0.5M, ~15k shares) executed in Q1 .
  • Near-term stock narrative: strong deposit growth and pipeline vs. guided NIM downtick; watch CD repricing (20% remaining) and deposit betas moderation as potential catalysts for margin stabilization in H2’24 .

What Went Well and What Went Wrong

What Went Well

  • Robust funding and liquidity: deposits up $173M QoQ (+10%) with stable market rates; added $55M brokered CDs and extended ~$40M FHLB borrowings to manage IRR .
  • Pipeline strengthening and raised loan growth target: commercial loan pipeline at ~$95M; 2024 loan growth now ~5% vs. prior ~4% .
  • NIM resilience: NIM 2.79% (+4 bps QoQ) as prudent pricing and Q4 balance sheet restructure helped stabilize margin; management: “NIM demonstrated resilience, expanding slightly” .

Management quotes:

  • “Success in deposit gathering during the quarter lays a strong foundation for future asset growth… significant loan pipeline approximating $95 million” .
  • “We strategically strengthened our balance sheet… added $55 million of brokered deposits… lengthened maturities of approximately $40 million of overnight borrowings” .

What Went Wrong

  • Earnings pressure vs. prior year: net interest income down $3.4M YoY due to higher funding costs; non-interest income down $1.8M YoY post insurance sale .
  • Efficiency deteriorated QoQ on normalized non-interest income and seasonal cost resets (FICA/unemployment/HSA, accelerated equity comp): GAAP efficiency ratio 79.92% (vs. 50.16% in Q4, which had one-time gains) .
  • Asset quality modestly softer sequentially: nonperforming loans rose to $27.98M (1.62% of loans) vs. $27.33M (1.59%) in Q4; credit costs ticked up (provision $0.27M) .

Financial Results

Core financials vs. prior periods

MetricQ1 2023Q4 2023Q1 2024
Net Interest Income ($MM)$17.325 $13.946 $13.907
Total Non-Interest Income ($MM)$4.113 $18.551 $2.267
Provision for Credit Losses ($MM)$(0.654) $0.282 $0.266
Net Income ($MM)$5.800 $10.174 $2.334
Diluted EPS ($)$1.06 $1.85 $0.42
Net Interest Margin (%)3.46% 2.75% 2.79%
Efficiency Ratio (GAAP, %)67.65% 50.16% 79.92%
Efficiency Ratio (Non-GAAP, %)67.18% 93.40% 79.90%
Yield on Loans (%)5.16% 5.43% 5.56%
Cost of Interest-Bearing Liabilities (%)1.65% 2.87% 3.04%
ROA (%)1.07% 1.90% 0.44%
ROAE (%)14.97% 25.73% 5.28%

Balance sheet and credit KPIs

KPIQ1 2023Q4 2023Q1 2024
Total Deposits ($B)$1.850 $1.719 $1.891
Total Loans ($B)$1.659 $1.721 $1.722
Nonperforming Loans ($MM)$24.084 $27.325 $27.977
NPL / Total Loans (%)1.45% 1.59% 1.62%
Allowance for Loan Losses / Loans (%)1.30% 1.28% 1.29%
Book Value per Share ($)$28.97 $32.40 $31.62
Tangible BVPS (Non-GAAP, $)$26.44 $32.07 $31.29
Tier 1 Leverage Ratio (%)9.13% 10.37% 10.52%
Brokered Deposits Added ($MM, QoQ)——$55
Borrowings Extended (Term)——~$40M to 3 years

Actual vs. Consensus (S&P Global)

MetricQ1 2024 ActualQ1 2024 ConsensusSurprise
Diluted EPS ($)$0.42 N/A (S&P Global consensus unavailable for EVBN)N/A
Revenue (NII + Non-Interest Income)See above tables N/AN/A

Consensus estimates via S&P Global were unavailable for EVBN at this time.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (NIM)Q1 2024Flat vs. Q4 2023 (2.75%) Actual 2.79% achieved Beat vs. guide
Net Interest Margin (NIM)Q2 2024—2.65% (temporary 13 bps hit from leverage) Lowered (near-term)
Commercial Loan GrowthFY 2024~4% ~5% Raised
Operating Expenses (Bank-only)FY 2024Down ~1.5% YoY Down ~1–2% YoY Maintained/slightly improved
Dividend per ShareQ1 2024—$0.66 declared Feb 20; paid Apr 9 Maintained
Capital Actions (Buybacks)2024Considering buybacks; constrained liquidity Executed ~$0.5M (~15k shares) in Q1 Initiated small repurchases
Effective Tax Rate2024~22% forward Q1 actual 21.7% In-line

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023 and Q4 2023)Current Period (Q1 2024)Trend
NIM trajectoryQ3: 2.79% reported; adjusted 2.87% with 15–20 bps compression expected in Q4 . Q4: 2.75%; guided Q1 flat .2.79% (+4 bps QoQ); guide 2.65% in Q2 due to temporary leverage .Near-term downtick, stabilization expected later.
Deposit pricing/betasCompetition driving higher costs; moderation expected into 2024 .“Rate of increase is decelerating,” offerings stable; some migration to interest-bearing accounts .Moderating.
Loan pipeline/growthQ3 pipeline ~$67M; 2023 growth ~3% . Q4 pipeline ~$75M; 2024 growth ~4% .Pipeline ~$95M; 2024 growth ~5% .Strengthening pipeline and outlook.
Capital managementDiscussed TEA sale and balance sheet restructure; flexibility for buybacks/M&A; Tier 1 leverage ~10% .Small buybacks executed; dividend support prioritized .Flexibility maintained; cautious deployment.
Securities/ALMQ4 sold $78M securities; 2.2-year earn-back; improved forward NII .Added $55M brokered CDs; extended ~$40M FHLB borrowings 3 years .Liability management to mitigate rate risk.
Credit qualityQ3 NPLs decreased 2%; criticized loans ~$76M . Q4 NPLs flat; criticized loans down to $71M .NPLs up slightly to $27.98M; criticized loans $70M; net charge-offs minimal .Stable with modest sequential uptick.
Municipal deposit seasonalityQ4: seasonal outflows .Q1: seasonal inflows (+$84M muni deposits) .Typical seasonal pattern.
Tax rateQ4 guided ~22% .Q1 effective tax rate 21.7% .In-line.

Management Commentary

  • Strategy and outlook: “First quarter results reflect solid performance… net interest margin demonstrated resilience, expanding slightly… deposit gathering during the quarter lays a strong foundation for future asset growth… significant loan pipeline approximating $95 million” .
  • Balance sheet actions: “We added $55 million of brokered deposits… lengthened maturities of approximately $40 million of overnight borrowings… expect current liquidity position to be the foundation that supports expected commercial loan growth of approximately 5% in 2024” .
  • Expense discipline: 2024 bank-only expenses expected down 1–2% YoY as first quarter run-rate approximates go-forward level after seasonal resets and merit increases .

Q&A Highlights

  • Balance sheet/liquidity strategy: Brokered CDs mitigate municipal seasonality; extended borrowings prefund loan growth; expect overall balance sheet roughly flat with slight upward trend excluding wholesale steps .
  • Loan growth cadence: 5% full-year growth expected to be evenly spread over remaining three quarters .
  • Capital deployment: Priority order—support asset growth, maintain dividend, opportunistic buybacks; executed ~$0.5M repurchases (~15k shares) in Q1 despite market liquidity constraints .
  • NIM trajectory: Q2 guide 2.65% with expectation of flattening/decellerating deposit betas; ~20% of CD book left to reprice toward market .
  • Origination yields: Term loans ~7.25–7.50%; C&I better than prime .
  • Fees/insurance line: $150k quarterly reflects consistent wealth program ($700k/year) remaining in that line post-TEA sale .
  • Credit tone: “Not seeing a whole lot of impending challenge right this second”; working through existing nonperformers; cautious given higher-for-longer rates .

Estimates Context

  • S&P Global consensus estimates for EVBN were unavailable; thus, no EPS or revenue comparison to Street is provided.
  • Implications: Q2 NIM guide to 2.65% and moderation in deposit betas suggest near-term estimate pressure on NII, while raised loan growth (~5%) and stabilized funding costs could support H2’24 estimate stabilization .

Key Takeaways for Investors

  • Near-term margin headwind: Q2 NIM guided to 2.65% from 2.79% on temporary leverage; expect stabilization as deposit betas decelerate and CDs complete repricing (~20% remaining) .
  • Funding strength is a positive catalyst: Deposits +$173M QoQ with municipal inflows and brokered CDs supports loan growth execution and liquidity positioning .
  • Loan growth outlook improved: Pipeline ~$95M and FY24 loan growth raised to ~5%; origination yields are attractive (term ~7.25–7.50%, C&I > prime), supporting future NII once leverage rolls off .
  • Expense control aids earnings durability: 2024 bank-only expenses expected down 1–2% YoY; use Q1 run-rate as reasonable baseline after seasonal resets .
  • Capital flexibility: Tier 1 leverage 10.52% with dividend continuity ($0.66) and small buybacks executed; expect continued opportunistic capital deployment within liquidity constraints .
  • Credit steady: NPLs up modestly QoQ but criticized loans down YoY; net charge-offs remain low, indicating manageable credit risk in higher-rate environment .
  • Watch H2 setup: If deposit betas continue to moderate and loan growth materializes, earnings trajectory could improve as the temporary Q2 NIM reset fades; monitor competitive pricing and municipal seasonality .

Appendix: Other Relevant Q1 2024 Press Release Details

  • Effective tax rate was 21.7%; GAAP efficiency ratio 79.92%; Non-GAAP 79.90% .
  • Book value per share was $31.62; tangible BVPS $31.29; Tier 1 leverage 10.52% .
  • Total assets $2.26B (+7% QoQ); interest-bearing deposits at banks increased $161M QoQ .